Fenwick & West Life Science Venture Financing Survey Shows Small Improvement in Company Valuations but Continued Decline in VC Fundraising

MOUNTAIN VIEW, Calif., April 15, 2013 /PRNewswire/ -- Fenwick & West LLP, one of the nation's premier law firms providing comprehensive legal services to high technology and life science clients, today announced the results of its 2012 Life Science Venture Capital Survey.

The survey analyzes the valuations and terms of venture financings for 363 life science companies headquartered in the United States that reported raising capital during 2012.

"For 2012, up rounds outpaced down rounds 52% to 17%, with 31% flat. This is a small improvement over results from 2011, which averaged 47% up rounds and 25% down rounds, with 28% flat," said Matt Rossiter, a partner in the firm and co-author of the survey.

An up round is one in which the price per share at which a company sells its stock has increased since its prior financing round. Conversely, a down round is one in which the price per share has declined since a company's prior financing round.

The Fenwick & West Life Science Venture Capital Barometer™ – which measures the change in share price of life science companies funded during the year compared with the share price of their previous financing round – showed an average price increase of 23% for 2012, in comparison to 14% for 2011.

"The Barometer results continued to trend modestly upward during 2012," said Barry Kramer, survey co-author and also a partner at the firm. "However, the number of life science financings declined. This pattern suggests that while raising venture financing is becoming more difficult, those companies able to raise additional financing are doing so at an improved valuation."

"The life science venture financing environment remains challenging," noted Rossiter, "with an increasingly short supply of capital, despite factors – such as aging world populations and rising living standards in developing countries – that will help support long-run demand for life science innovation. Our analysis shows that fundraising by life science venture capitalists continues to decline, and represented only 12.5% of venture funds raised in 2012. While funding from corporate investors, wealthy individuals and disease foundations is helping to fill some of the gap, entrepreneurs that plan to seek venture capital financing would do well to carefully consider factors, such as capital efficiency and a faster path to exit, that can increase the odds of raising scarce funding."

About the SurveyThe Fenwick & West Life Science Venture Capital Survey, co-authored by law firm partners Matt Rossiter, Barry Kramer and Michael Patrick, offers a unique view of the life science venture capital market by providing insight into the changes in venture capital valuations and terms. By focusing on these trends, the Fenwick & West Survey complements the data reported by other industry sources, such as Dow Jones VentureSource and the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

About Fenwick & WestEstablished in 1972, Fenwick & West LLP is one of the nation's premier law firms with extensive expertise in venture capital, public offerings and other corporate finance, joint ventures, M&A and strategic relationships, intellectual property, litigation and dispute resolution, taxation, antitrust and employment and labor law.